Upon accepting his position as the Head of Iran’s Judiciary, Shahroudi proclaimed: "I have inherited an utter ruin from the previous judiciary.", referring to Mohammad Yazdi's 10 years in office.[8][9] He appointed Saeed Mortazavi, a well known fundamentalist and controversial figure, prosecutor general of Iran. Later when Mortazavi lead the onslaught of the judiciary against Khatami's reform movement, Shahroudi was prevented by regime hardliners from stopping Mortazavi's violent acts against dissidents or removing him from power.[10] In July 2011 Shahroudi was appointed by Supreme Leader Ali Khamenei to head an arbitration body to resolve an ongoing dispute between Mahmoud Ahmadinejad and the parliament.[11]

In 2001, the judiciary prosecuted several reformist members of parliament for speeches and activities they had carried out in their capacity as MPs. The Iranian constitution grants immunity to members of parliament during their tenure, and the courts have no right to put MPs on trial for speeches given in parliament. The incident led to a major conflict between Iranian president Mohammad Khatami and Chief of Judiciary Hashemi Shahroudi. In a letter, Khatami protested the courts' prosecution of MPs, insisting the act contravened the political immunity which the Iranian Constitution has provided for the deputies. The notice prompted Hashemi Shahroudi to respond, calling Khatami's letter "a surprise." "Since judges, according to the Constitution and ordinary laws as well as the jurisprudential principles, are independent in their interpretation of the law and issuing verdicts, nobody -- not even the judiciary chief -- has the right to impose its interpretation of the law on judges," Shahroudi said in part of his letter to President Khatami.[12] Shahroudi denounced reformist MPs, stating they weakened parliament by defending "westernized" journalists and other liberals.[13] While the Iranian constitution does state in Art. 167 that judges need to adjudicate on the basis of Islamic sources in cases where no codified law exists, this was clearly not the case with regard to immunity of standing members of parliament. Shahroudi's commentary must be interpreted as being politically motivated, and is symptomatic of his failure to strengthen the rule of law during his tenure.

The decriminalization bill (in Persian: تعيين مجازات‌های جايگزين) refers to a legal bill submitted by the Iranian Judiciary to the parliament. It aims at substituting imprisonment and execution by educational workshops and social penalties. The bill is considered one of the most important legal bills prepared by the Iranian judiciary during Shahroudi's tenure.

According to the bill, for all minor crimes, whose punishment is less than six months of imprisonment, imprisonment will be substituted with social penalties. This category of crimes include crimes related to traffic, environmental, medical, family, cultural and hunting offenses. The bill also demands that criminals undergo an educational or skill training course convened by the judiciary system.[14][15]

The bills also addresses the crimes conducted by minors in the three age categories 7-12, 12-15 and 15–18 years old. It is reminiscent to the Iranian criminal law of 1925. According to the bill, minors can no longer be executed. The bill is based on several years of continuous discussion with religious scholars at the seminaries.[16][17]

According to the bill, the crimes conducted by children of 7–12 years old is not punishable. For the age categories 12-15 and 15-18, imprisonment is replaced by mandatory training and education programs. For the age category of 15-18, execution is applied for crimes like murders if and only if the judge is confident that the criminals are mentally developed as adults and the crime is conducted intentionally and with a well-thought-out-plan. However, both teenagers and young adults (older than 18) with low mental development, cannot be sentenced to death.[18]

In 2009, the bill was approved by the judiciary commission of the Iranian parliament. The bill will be ratified after the approval of the parliament and the guardian council.

Shahroudi is most notable in the West for instituting Iran's 2002 moratorium on stoning as a form of capital punishment. The penalty remains on the books however, leaving open the possibility that the moratorium could again be overturned as it was in 2006 and 2007.[19][20][21][22]

In 2009, Shahroudi offered a bill to the Iranian parliament that targets the independence of Iran's Bar Association.[23][24] According to this bill, lawyers will be watched by the Iranian ministry of Intelligence and their credentials depend on the approval of the intelligence service.

In 2009, Shahroudi issued an order to restrict people's access to Iranian Satellite TV Channels and to prosecute staff of Satellite TV Channels whose opinion is not in line with that of the Islamic Republic.[25] People who support these channels and internet users who act not according to the line of the constitution, can be punished with up to five years of imprisonment.

Shahroudi has received criticism from a number of Iranian scholars and lawyers. Mostafa Mohaghegh Damad, a well known Iranian scholar and expert on Islamic law, wrote a letter of criticism in August 2009.[26][27][28]